A New Space Race: Companies Vie to Haul Cargo, Passengers

Backdropped by Earth the International Space Station (ISS) is seen from NASA space shuttle Endeavour after the station and shuttle began their post-undocking relative separation May 29, 2011 in space.

The commercial space race is on.

Perhaps nothing signified its arrival like this spring's successful cargo flight of the Dragon spacecraft to the International Space Station that was launched by private firm SpaceX.

SpaceX, run by billionaire entrepreneur Elon Musk, isn't the only firm vying to haul cargo and people into orbit since NASA relinquished its near-monopoly on U.S. space transportation by retiring the Space Shuttle program last year.

At least a dozen companies are developing spaceships to replace the shuttle's duties or to carve their own commercial pathways in space.

The U.S. government's new approach of letting private companies take over the work NASA used to do in low orbit around the Earth — and pay for part of it — has opened the final frontier to free enterprise.

And many advocates of commercial space ventures foresee a new and even grandiose era of U.S. space exploration, development and travel resulting from it.

"We're making space more American. We're making space more democratic. We're making space more available, approachable and real to the average American," says James Muncy, president of the space policy consulting firm PoliSpace in Alexandria, Va.

Even NASA says the sky is no limit to what a largely unfettered U.S. space industry can achieve.

"If NASA is the only game in town … our space aspirations will always be limited by the size of NASA's budget," says Philip McAlister, director of commercial spaceflight for NASA. "When you start turning this over to the private sector, there's no limit."

But this new strategy still comes with some government assistance and say.

In the last six years, NASA has doled out about $2 billion to private companies to design and build space taxis to the Space Station. Earlier this month, NASA pledged an additional $1.1 billion to three U.S. companies — aerospace giant Boeing, Musk's SpaceX and high-tech firm Sierra Nevada— to finish the work.

Right now, NASA is paying the Russians more than $60 million a person for a ride to the Space Station, money it says it would rather give to U.S. companies. NASA says it would have cost the government about twice more than what it's giving the companies to develop the new spacecraft.

The savings, the space agency says, frees it to use its resources to explore deep space, specifically Mars, the moon and asteroids. But a crucial step for the emerging industry is to be able to survive without NASA funding.

NASA is hopeful the companies will find other customers. That ultimately will breed competition and drive down prices for everyone, the agency reasons. And once the companies have customers, they'll have a better chance at attracting more investors.

Nobody can predict how big the market will be for commercial space transportation. And as in any burgeoning industry, some businesses will succeed and some will fail.

"We don't know which will be the companies that are going to make money in space," Muncy says. "It's like 1976 and we don't know who is going to be Apple computer and who is going to be one of the five companies that dies within a few years."

Entrepreneurs in Charge

Perhaps it's no surprise that many of the companies trying to carve out a niche in space are run by savvy entrepreneurs who've made fortunes in other industries.

SpaceX, based in Hawthorne, Calif., is led by Musk, who started out in Silicon Valley and co-founded PayPal and Tesla Motors, the electric car company.

Sierra Nevada's Space Systems, headquartered in Louisville, Colo., has Mark Sirangelo as its corporate vice president. His résumé includes stints at a global communications firm, an investment bank and a technology design firm.

, a Kent, Wash.-based start-up, is backed by Amazon founder Jeff Bezos. He runs it as secretively as he does Amazon.

Carissa Christensen, managing partner of Alexandria, Va.-space consulting firm the Tauri Group, says these entrepreneurs have a good shot at succeeding because they're equally passionate about space and business. "They are different," she says. "They do have the track record of building successful businesses. … They have capital and they have the ability to sway markets and investors to get additional capital."

Fulfilling Dreams

Perhaps the highest-profile space venture is British billionaire Richard Branson's Virgin Galactic. Branson isn't going after NASA dollars. He's tapping into the desire of the wealthy to fulfill their dreams of becoming astronauts.

Virgin Galactic is building in Mojave, Calif., a reusable vehicle that can complete a suborbital flight, meaning it will fly above the planet's surface, then return to the atmosphere without hitting orbit. The company projects it will have its first commercial space tourism flight on the six-passenger, two-pilot SpaceShipTwo by next year, at $200,000 a seat.

"Is $200,000 still a lot of money? Yes, a lot to some people, but there's a lot of people out there who can afford that," says George Whitesides, CEO of Virgin Galactic. "We think it's going to be a great business for us."

The company has deposits from more than 535 people wanting a ride, Whitesides says.

A recent study by the Tauri Group that was commissioned by the Federal Aviation Administration's Office of Commercial Space Transportation and Space Florida, a state organization promoting aerospace economic development, supports Whitesides' assertion that there will be high demand for commercial suborbital spaceflights.

The study predicts that the flights could generate $600 million to $1.6 billion in revenue in their first decade of operations. About 8,000 people worldwide with net worth exceeding $5 million are interested in the trips. About 3,600 of them will fly within that first decade, the study predicts.

A total of six firms are trying to build suborbital vehicles. One of the cheapest tickets is on XCOR Aerospace's Lynx Mark 1, which will carry a pilot and one passenger on each flight. Andrew Nelson, chief operating officer of the Mojave, Calif., firm, says it's on track to take paying customers to space by next year. Each passenger seat goes for $95,000.

A majority of the passengers will be tourists, but Nelson also hopes to attract scientific and commercial researchers who want to experiment in space. Pharmaceutical and biotech companies are the likeliest candidates. "That will ramp up as the science community gets more accustomed to using the vehicles," he says.

Sirangelo of Sierra Nevada's Space Systems also is looking for other markets to tap besides the government. The company is developing Dream Chaser, which resembles a mini NASA space shuttle that can land on a runway rather than in the water. "The whole idea of being versatile is key to any business," he says. "NASA is not the entire program and eventually will not be the majority, but it's a way to kick-start the program."

'A Huge Upside'

Michael Lopez-Alegria, president of trade group Commercial Spaceflight Federation, says there are many ways for the companies to make money without NASA. "I think there's a huge upside to the market," he says.

They can launch satellites into the Earth's orbit, for instance.

Virgin Galactic in July announced it would develop a satellite launcher called LauncherOne to help finance its commercial space program. "We think there's a real opportunity there," Whitesides says.

Some also see opportunity in hooking up with Las Vegas-based Bigelow Aerospace, which has already launched two expandable space stations. Robert Bigelow, owner of hospitality chain Budget Suites of America, is financing the effort.

SpaceX in May announced it had agreed to transport people to Bigelow's space habitats, which are flexible and can be configured for various uses. Bigelow is also working with Boeing. The idea is to give governments, corporations and scientists an alternative to doing research at the Space Station.

Taking Notice

Venture capitalists, investment bankers and other investors are starting to notice the potential, says Richard David, co-founder of NewSpace Global, which tracks the top 100 companies involved in the industry, which is dubbed New Space.

"More companies are getting private funding and not having to rely exclusively or predominately on NASA," he says. "If they don't stop that reliance, then they position themselves for some serious challenges."

Advocates of commercial spaceflight have been waiting for the nascent industry's "Netscape moment." That refers to the August 1995 initial public offering of stock in Netscape, which created the then-popular Web browser. That triggered an avalanche of IPOs, then the dot-com boom.

Could the commercial space industry be on the verge of a similar moment?

"I think we're at the beginning of a really big shift," says David Livingston, host of popular Internet radio program The Space Show. "Space has not had their Netscape moment. That hasn't happened yet. But many people think that if there's to be a Netscape moment, we're getting closer."